Monday, January 31, 2011

I've actually spoken or written on this topic several times. Starting a business with little capital is called "bootstrapping". To make sure that you maximize the use of the little funds you have for your new small business, you should first create a brief (3-5 page) business plan. You need to figure out who you are targeting (your market), what your products or services are, how to reach your market and how to differentiate yourself from your competitors (your marketing strategy).
Once you have a fairly clear vision for your business, you can determine what resources you have available. If you wish to sell products to individuals in a retail environment, the expensive way is to rent space and open a store. An inexpensive way would be to open a store on the web, rent a kiosk in a mall or other area, or ask to offer your products in an existing store (i.e., offer jewelry for sale at a popular local clothing store). Do you have a service you wish to provide to other small businesses? You can find other businesses that serve your market and offer to partner with them to provide additional services to that existing business' customers.

Do you need money to do marketing? There are many books out there that provide cheap marketing and public relation techniques and how-tos. Do you need assistance handling all the little things but don't have the time? You can hire a virtual assistant through elance, craigslist, or similar site. Do you need office space? You can use your home or apartment and contract with a flexible office space provider such as Corporate Suites that will afford you access to a conference room when you need it.
With so many companies offering web-based solutions it is much cheaper to start a company than it was ten years ago. You can use a template-based solution to build your website cheaply at GoDaddy.com, justhost.com, or Yahoo. You can find reputable part-time bookkeepers online. You can access legal advice cheaply through Prepaid Legal, which you can sign up for online.
There are many, many ways to creatively tap into resources and minimize costs. Just use your business plan to help you figure out what you need then seek out creative solutions to those needs.

Friday, January 28, 2011

It is not just corporate America that benefits from interns. It is often harder for small and medium businesses to find new talent because these smaller entities do not have the recruiting budget or staff to send people to various college campuses. Rarely do smaller businesses typically have the cache to attract up and comers. However, companies can both augment their recruiting efforts and reduce their staffing costs by pursuing college interns.

The number of companies that offer internships is significantly smaller than those that offer full-time positions. In tandem, the number of available internship positions is markedly less than the number of available full-time positions. I remember this very well from my days at Wharton. For the summer of 1997 the investment banks recruited for one-fifth to one-seventh the number of internships as they did full-time positions. It was a similar situation at consulting firms. So small and medium businesses that provided a great summer internship experience had a chance at attracting talent that may not have otherwise considered them for a full-time position. And once a company gets the intern in the door, the likelihood of the intern joining full-time upon graduation (assuming the company appreciated the intern’s performance and makes the offer) is very high.

A company does not need to put a formal program in place to hire a college intern or two. Either the human resource employee or the hiring manager or both just need to ensure that they clearly layout the following: what the company expects the interns to accomplish during the time they are there; what their role and responsibilities are; who they report to; and who they should approach for assistance. (Sometimes who they work for differs from who provides assistance.) The hiring manager or human resources person must discuss this with the interns either before their start date or on their first day of work. Therefore, if the intern(s) skill set or interests distinctly differ from the company’s expectations, the company may be able to partially modify the intern(s) assignment(s). It is important that the employer gets a great performance out of the interns now... AND make a favorable impression. And most companies have a long list of items that need to get done so the modification should be relatively painless. Of course, discussing the internship scope during the interview or as soon as an offer is made will enable your company to adapt BEFORE you put everything into play.

Most internships are paid. Engineering interns make the most. But even engineering interns’ wage expenses are still significantly lower than a full-time engineer in a similar role. And remember, you don't provide healthcare and other benefits to college interns. The best way to locate interns is to post the position at the applicable career placement centers at colleges and universities you would like to recruit from. Need help with finance or accounting tasks? Hire a finance intern from a local business program. Need help with construction sales? Hire an architect or engineer from a local architectural or civil or mechanical engineering program.

Monday, January 24, 2011

Here's a response I had for a couple of college students who told me they wanted to start a business after they graduated and what could they do now to prepare. I know I target my blog to current business owners but I like to occasionally "speak" to others who are considering a business start-up.

So, here's my response:Any general business degree will serve you well, whether it's business management or business administration. If you have an interest in a specific area such as marketing, accounting, or finance, then pursue that and make sure the rest of your requirements provide a well-rounded business education. When you run a business, you must know something about every area of the overall business: how to entice customers (marketing and public relations); how to manage the books (accounting); how to pursue and obtain loans or investment (finance); how to recruit, hire, train and manage employees (human relations or HR); how to make sure the business runs smoothly (operations). You can't possibly know how to do everything well, but you should develop a basic understanding of what's involved in each area. You can then hire or outsource to have others handle those duties as the business grows.

Regarding specifically opening a gym, my only other recommendation would be to locate gyms you like and speak with the owner or general manager about getting a job there. Tell them you'd like to learn the business and apprentice so it doesn't matter where you start. You never know, you could find an owner who eventually sells you his (or her) business...or who may help you start one elsewhere. At the very least, you combine a good university education with the hands-on practice obtained while working at the gym. Essentially, this way you create your own internship/apprentice program.

Of course, for those interested in other types of business, the same advice applies. Just switch out "gym" and replace it with the business you aare interested in.

Thursday, January 20, 2011

I recently had a question about what is involved in converting from a single member limited liability company (LLC) to a 2-person or larger LLC. The person wanted to know how easy or difficult it was because they wished to obtain equity in the LLC. The founder was showing reluctance to add him as a member. I've had similar questions so thought I'd include my response here.

The ease or difficulty depends. If you take the short cut, it is easy and not a big deal. But I don't recommend this. It sounds like the owner doesn't want to give you equity in the first place, so not setting up everything properly could result in a lot of headaches down the road. I've seen a lot of businesses or relationships fall apart because of disagreements between the owners...and that was when things started out very well.

The current owner of the single person LLC will have to file an amendment to make the LLC a 2-person or more LLC. This is the "easy" part. That documentation is fairly straight forward. He will need to file a Member Agreement (depends on the jurisdiction). This is the "hard/complicated" part. Even if it's not officially required, it's important that a FULL Membership Agreement be completed. This Agreement states who has what shares/membership interests, who is responsible for what, what happens in the event of a serious disability, death, or business break-up, and how to handle a sale or dissolution of the business. Working through this Agreement will bring potential issues to light and make for a smooth transition should you decide to go your different ways, or when the business is sold or dissolved.

Note: If someone keeps saying something is complicated, try to determine their underlying concerns and address them. Maybe it is that the LLC Membership Agreement seems complicated. Or maybe he just doesn't want the headache of another owner, no matter how small the equity stake. If it's the latter, you'll have to convince him that what you bring to the business is truly greater than any headache he anticipates.

Tuesday, January 18, 2011

If you are a small or medium business owner or start-up seeking investor capital to grow your business, you need to look at your business the same way an investor would. It is crucial that you view your business as an applicable investment vehicle just like you would stock in a publicly traded company, residential real estate investments, commercial real estate, oil and gas wells, or any other asset class you have heard of or considered investing in. If you view your small business this way, then others will.

When you look at your company as something other than that which supports your lifestyle (money to pay your personal bills, status in the community, flexibility, etc.), you treat it differently. You treat it less like an extension of you. You treat it with more respect.

So here are the key ways you need to view your business as:

1. A marketable asset - see comments above.
2. A source of long-term wealth.
3. A creator of jobs.
4. A source of investment income for yourself and others who believe, also known as investors 20, 50 or 100+ jobs, your company may be eligible for local, regional, or state financing tied to job creation. These are given in the form of grants or low-interest loans (bonds, etc.)

Note to #3. If your company will use investment funds to propel growth that creates

Thursday, January 13, 2011

Someone recently asked me to provide them with a list of the advantages and disadvantages of buying a business vs. starting a business. There are inherent risks in both business acquisitions and business start-ups. Some people have a profile better suited for one over the other. Here is the list I provided the individual.

Advantages of buying a business:
1) Assuming the business is profitable and has been for at least two years, you gain easier access to bank financing and other financing entities because the business has a verifiable track record.
2) You already have customers and potential customers.
3) You have an operational infrastructure - personnel, IT, processes, etc.
4) You have a proven product or service.
5) You have operational cash flow (again, assumes you purchase a profitable enterprise).
6) You can leverage the existing customer base or product to sell your new product or add-on service offering.
7) Business may already have a D&B profile and established business credit.
8) You have employees and management who can help you better understand the business and its operating environment.

Advantages of starting a business:
1) You can operate virtually and start on a shoestring budget.
2) You can establish and mold the company culture as you wish.
3) You can move as quickly or as slowly as your lifestyle and desires dictate.
4) Essentially, you (or you and your fellow founders/investors) have complete freedom to do what you want, within legal and financial limits, until your company reaches a certain point.

Disadvantages of buying a business:
1) You may not do sufficient due diligence and end up with serious problems you didn't foresee.
2) The company may have unknown legal or environmental issues that could crop up 1-3 years later.
3) You could lose a major customer soon after purchasing the business. (Then you'd have a business which isn't worth nearly what you paid and/or on which you can't make the payments.)
4) You may not like the employees and/or management.
5) You may have customer service or employee morale issues, or both.

Disadvantages of starting a business:
1) Difficulty obtaining sufficient start-up capital.
2) Until you have the funds to hire others, you must handle most of the functions yourself.
3) If you do not have an advisory board, you have to consider all decisions - strategic, operational, financial, etc. - on your own, until you can hire management.
4) You have to develop a product or service and find customers for that product/service from scratch.

Wednesday, January 12, 2011

As you know we've been snowed in here in Atlanta. I decided to use the time constructively and watch the new show on Bravo called "Tabitha's Salon Takeover". (Ok, I'm not sure how new it is but I just discovered it on Monday!) I watched 4 or 5 episodes. Bravo was having a bit of a Tabitha's Salon Takeover marathon. (Are they trying to compete with those Law & Order marathons on A&E? I digress.)

I think the show is excellent. It provides a clear prescription Rx for ailing businesses. Tabitha, a stylist and successful salon owner herself, visits hair salons around the country taking one week per salon to effect a turnaround on the ailing salon business. Hair salons are selected from the numerous salon owners who write in and request her help. Tabitha essentially parachutes in (figuratively, not literally - since this IS reality tv, I must be clear), assesses the situation from all sides, recommends a course of action and implements. All in one week.

The issues obviously are specific to hair salons such as how to cut or frost hair. However, many of the issues apply to any retail business - cleanliness of the work environment, level of reception, customer service, etc. And a significant number of the problems apply to any ailing business: effective vs. ineffective management styles, employee training or lack thereof, low employee morale, poor follow through, insufficient IT support or antiquated software systems, etc.

On the show Tabitha follows a methodology. She conducts an assessment where she first observes the behavior of everyone in the salon from cameras the employees and owners don't know are there. Next, she views portions of the tape with the owner and asks him/her/them what he/she/they think the issues are. She then introduces herself to the staff and holds a staff meeting the following day where she gets employees' input on the issues at the salon. Sometimes the owner(s) and staff agree on the issues. Sometimes their opinions are highly divergent. Sound familiar?

I think Tabitha's Salon Takeover shows business consulting at its best. Sometimes business owners need someone else to come in and assess problems and their causes. When a business encounters difficulties, small business owners often spend so much time down in the trenches they cannot elevate themselves up to see the forest for the trees. And again, sometimes the owner(s) is/are the problem.

Tabitha's Salon Takeover states that it follows these steps: 1) Clean up management (notice this is first!); 2) Re-fresh staff. It also injects new life into the business with new customers 3) via a day spent doing marketing and PR. 4th: The show spends 2 days renovating/re-freshing the work environment. 5th: Tabitha focuses a great deal on providing great customer service.

I'm quite sure many others besides business owners watch this show. It has a lot of entertainment value. (How many entrepreneurs do you know who like to be told they're doing things wrong or they are one of or the main problem? That right there makes for certain drama!) However, I think the show provides an EXCELLENT view of what goes wrong with businesses...and how to fix them and get back on track. And perhaps be even better.

So I highlyrecommend you check out Tabitha's Salon Takeover. Even if your business is running smoothly, you'll pick up a few helpful hints...if not for yourself, then for others.

Monday, January 3, 2011

Today is Monday, Jan. 3. I am an Ohio State alum (BS in Industrial & Systems Engineering) and a HUGE Ohio State Buckeyes football fan. So this year I finally bought tickets to a BCS bowl game. I'll be at the Sugar Bowl in New Orleans watching Ohio State play Arkansas, tomorrow, January 4. For all the SEC followers (I live in Atlanta so I'm surrounded by hordes of them!), enjoy your bowl game but don't forget to tune in to see us!

On a related note, for future reference, bowl games are a SUPERB way to reward client loyalty, especially if you have a strong locally-focused or regionally-focused business. It can be expensive to purchase all the tickets but, believe me, it can and is well worth it. (Those tickets can also be very hard to come by.) It's a great way to interact with your customers in a fun environment...and it's something that others would rarely, if ever, offer them. Therefore, BCS bowl game tickets are the perfect gift for those who are football fans.

It doesn't even have to be their favorite team. However,I stress local and regional because it definitely helps if the client has a strong affinity for the team you get them tickets to see. (Duh, right?!)

Okay, back to my Sugar Bowl game. You may not see a post from me until Thursday. I need time to digest (hopefully) our win and make it back to home base from New Orleans!